TV[R]EV: Winter Is Coming: Why The NCTC’s Deal With Sony Vue Threatens The MVPDs Broadband Monopoly

A seemingly minor announcement by the National Cable Television Cooperative (NCTC), that its membership is now going to be selling subscriptions to Sony Playstation Vue and Fubo.TV may be the first crack in the heretofore impenetrable wall that’s kept the nation’s MVPDs insulated from the massive changes going on in the industry.

You see, it’s been an article of faith among those of us who cover the TV industry that the one thing that’s saved the television industry from music and print industry style disruption is the fact that broadband in American is pretty much a monopoly, and the companies maintaining that monopoly also control pay TV.

What that’s meant in practical terms is that the incumbent broadband provider in any region could easily shut down any new virtual TV upstart simply by shifting the levers: “You want to cut the cord and get broadband only? Well, that’s going to cost you $150/month. But, if you go with our more basic Bronze pay-TV package, we can give you that, plus broadband for just $99/month.” (Given the high cost of customer acquisition in a very mature market, it makes sense for the MVPDs to do whatever it takes to keep customers in the fold.)

But with the NCTC deal, that all might change.

There are over 800 NCTC members, small local cable providers who have struggled to compete with the likes of Comcast and Verizon, and they currently represent around 9% of the pay-TV market.

To begin with, they can’t negotiate the sorts of carriage deals the big players can, so their pay-TV costs are higher, margins lower. And as much as we mock the interfaces of most of the larger MVPDs, the smaller players interfaces are even more primitive.

Then there’s the fact that the Verizons of the world generally had much better internet service, with faster connections (now up to 1G) and greater stability.

What the NCTC deal does is give the smaller cable companies a very competitive TV product. While Sony Vue is not the standout among virtual MVPDs, it’s still quite good and the interface, which allows for full TV Everywhere (TVE) functionality and does not require a set top box, is superior, to most of the larger MVPDs, who also don't offer anything close to real TVE.

Since most of the smaller cable companies piggyback on the same wires the larger MVPDs use, their internet connections have gotten much faster and more stable as well, making them a much less risky bet for anyone who needs to have working broadband 24/7.

The combination makes them a very viable alternative to traditional MVPDs and their broadband and pay TV bundles, especially if the smaller MVPDs are able to offer live linear broadcasts from their local network affiliates. (The inability to do so in many markets has slowed down the growth of virtual MVPDs like Vue, as customers want to be able to watch prime time in real time. While the networks have been making progress in working with affiliates to solve this problem, it hasn’t completely gone away.)

Wins All Around

The NCTC deal is good for Sony because it greatly expands their potential audience, gives them a way around the jacking-up-prices-for-broadband-only dilemma, and it gives them additional marketing firepower and the ability to negotiate better carriage deals the next time out.

It’s good for the local cable companies in that it gives them a much better, more innovative TV product for their customers, plus (likely) advertising support from Sony.

It’s good for consumers in that it creates real competition and gives them an alternative to big cable, as well as a way to switch to one of the virtual MVPDs while still retaining the cost and ease-of-use benefits of a bundled service package.

It’s also good for the industry because competition is always good. It keeps everyone on their toes, forces them to stop taking customers for granted and spurs innovation. In the case of the traditional MVPDs, it might actually force them to do something radical like migrate their interfaces to a library-based system.

None of this will happen overnight mind you.

The smaller MVPDs still have a long way to go, both in terms of actually implementing the service and in terms of convincing potential customers that they’re solid enough to make the switch. Consumer hesitation is likely to be less about TV and more about broadband, which has become so critical, people are not as willing to make the switch.

Yet.

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